Why Toyota's Camry might not stay America's top-selling car

LOS ANGELES — Toyota’s Camry has outrun a recession, recalls and natural disasters to stay America’s best-selling car for more than a decade. Odds are worsening that it can keep the title next year as challengers gear up for another run at topping the mild-mannered sedan.

“Camry for a couple generations lived in an extraordinary circumstance in which Toyota could defend price and volume,” said Eric Noble, president of Car Lab, an industry consultant. “That world is gone, never to return. It’s now like every other vehicle. It’s Clark Kent — it’s Superman without his cape.”

Camry’s U.S. sales lead over Honda’s Accord, Nissan’s Altima and Ford’s Fusion appears sufficient to ensure a 12th consecutive year as No. 1. In 2014, though, the era of Camry dominance could run out. Its margin has narrowed as Ford opened another Fusion assembly line, General Motors reworked the Malibu and Hyundai prepares an all-new Sonata.

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Even if Camry loses its grip on the sales crown next year, Toyota will remain a force to be reckoned with. The world’s biggest automaker came back more quickly than expected from a massive product recall in 2009 and 2010 and then from the tsunami in March 2011 that devastated suppliers in Japan. And as it did, the company focused on output of its Camry, redesigned for the 2012 model year, to meet demand and to secure the title.

Sales titles are mostly a matter of bragging rights, a rallying cry for the troops in the factories and at dealerships. Executives are quick to say that profit is more important than mere volume. Still, the battle over Camry’s leadership is a window into something broader: How carmakers all over the world, including Detroit, now make competitive mid-size sedans, the biggest part of the U.S. auto market.

“If you look at that entire segment today, there are really strong competitors,” Jim Lentz, Toyota’s chief executive officer for North America, said in an interview at Bloomberg headquarters in New York this week. “Go back 10 or 15 years and there were really only two choices in the segment. It was Camry or it was Accord.”

Toyota’s U.S. strength has been underpinned for decades by Camry — the market’s top-selling car in 15 of the past 16 years. The sedan drove the Toyota City, Japan-based company to a sales rebound in 2012 after four years of declines. Fresher Honda, Ford and Nissan cars have blunted Camry’s appeal this year. New sedans from GM and Hyundai promise that pressure will only increase.

A 22 percent jump in Camry deliveries in August helped boost sales to 287,119 so far this year, 2.3 percent more than a year earlier, keeping Toyota on pace to sell at least 400,000 this year.

While Toyota is holding on to the sales lead, it has done so at lower prices. The average transaction price on a Camry has declined by 6.4 percent this year through August. In contrast, Accord’s transaction prices rose 7.7 percent and Fusion’s increased 4.5 percent, according to Bloomberg Industries.

“The mid-size sedan market is the largest segment in the industry and we want Toyota to continue to be America’s favorite car, period,” Bob Carter, senior vice president of the carmaker’s U.S. sales unit, told reporters this month at an Automotive Press Association event in Detroit. “We like being No. 1 in the largest segment and we’ll stay there.”

Toyota offered incentives averaging $2,560 for each Camry sold in August, up from $1,879 a year earlier, based on an estimate by Edmunds.com, an auto pricing and data company. That was above the average for mid-size sedans of $2,193, said Jessica Caldwell, senior industry analyst for Edmunds.

That gave Camry the lowest transaction price, or what consumers paid after incentives, among the four best-selling sedans. The average Camry sold for $23,890 last month, compared with $24,910 for Altima, $24,925 for Accord and $25,987 for Fusion, according to Santa Monica, California-based Edmunds.

“Camry was one of the first key new products in the mid- size segment to come out,” said Stephen Usher, a Ji-Asia Research equity analyst, who rates Toyota a buy. Given the car’s release a year ahead of Accord, Altima and Fusion, “it’s inevitable in this segment that as a product ages, the transaction price goes down. That’s what we’re seeing,” said Usher, who is based in San Diego.

Camry’s newer rivals are winning an ever-bigger share of attention, according to San Diego-based Strategic Vision. This year, 3 percent of all people in the market for a new vehicle say they would consider buying a Camry, down from 4 percent a year ago, according to the consumer research firm.

The consideration rate for Accord improved to 4 percent this year from 3 percent in 2012, while Fusion’s rate doubled to 4 percent from 2 percent, according to Strategic Vision, which annually surveys 350,000 car buyers.

Ford revamped Fusion last year to win buyers from Camry with a design evoking Aston Martin luxury sports cars and a premium interior. The carmaker last month marked the start of Fusion assembly at its Flat Rock, Mich., plant, supplementing production in Hermosillo, Mexico, which alone couldn’t keep up with demand.

“We could have sold more if we had more,” Joe Hinrichs, Ford’s president of the Americas, told reporters last month. “We expect the sales momentum to stay here in the U.S. and around the world.”

The extra production helps Ford close the gap with Toyota’s capacity to make Camrys.

Toyota’s Lentz said Honda’s Accord continues to be the primary challenger for Camry, with at least 25 percent of customers saying they had also considered buying the Honda sedan. The percentage of Camry customers who also shop the Fusion is still in “single digits,” he said.

“The last time we lost it was during a model year changeover. A competitor came out with a new model and we were short of inventory,” Lentz said.

Camry was No. 1 from 1997 to 2000, lost to Accord in 2001, and has reigned since then.

Toyota builds its sedan at its main North American plant in Georgetown, Ky., and on a line at affiliate Fuji Heavy Industries’s Subaru plant in Lafayette, Ind. That gives Toyota annual capacity to make as many as 500,000 Camrys for the U.S., Canada and Mexico and for export to other markets, according to the company.

Honda has supplied more than 400,000 Accords in the past and Nissan estimates it has similar production capacity for Altima, now built at plants in Smyrna, Tenn., and Canton, Miss.

“We’ll set a sales target based on what we think the market demands. I’m confident we’ll reach our sales target,” Lentz said. “If somebody surpasses that, more power to them. I’m not going to just spend money to try and buy that number one position.”

The current incarnation of Camry arrived in 2011 as a 2012 model, and has changed little through the 2014 version now on sale. Alterations are in the works for a “mid-cycle” refresh due in the next six to 12 months, said Bill Fay, Toyota’s group vice president for U.S. sales.

“The feedback we’re getting on the car is still largely very positive,” Fay said in an interview in San Diego last month. “Consumers who buy that car really like it. It delivers a lot of value for the money or it wouldn’t be doing as well as it is.”

Fay declined to elaborate on specific changes in the works.

While refreshing a car with a five- to six-year model life helps stabilize sales, it seldom results in significant growth, Car Lab’s Noble said.

Still, the Camry’s ubiquity and reputation for reliability, combined with a U.S. customer base that runs to the millions, mean it won’t be easy to dislodge from the top spot, said Edmunds’ Caldwell.

“It will certainly be tougher for Camry to maintain its position, but it’s still possible,” she said. “Yes, there are newer and flashier models, but this buyer is still largely pragmatic and Toyota’s aggressive pricing caters to this mindset.”